There are some interesting observations to be made today. We have not seen so many bearish calls be made in one day in a long time. People have been pointing out this is a bear market and that every index is breaking down. From a psychological point of view, we always try to dig a bit deeper into the crowd’s psychology, and look for possible contrarian set ups.
Our take since October has been the crowd is wrong. Recent volatility and headline risks have made practically every investor scratching his head. The market reverses when it looks to break down, as well as it reverses when it looks to break up.
Post the Apple news today, people started explaining this is it for Apple. Interesting to note is that Apple has made a rather big reversal on very important levels. Maybe the last short-term Apple bull gave up today?
For months we pointed out the similar psychology between Apple and the Asian giant Tencent. The chart below shows Apple (orange) versus Tencent (white) adjusted for dates. All “bubbles” show similar patterns at highs, but they also tend to find support levels from where we have seen violent spikes higher form.
We suggested earlier today, when futures were collapsing, that the markets remain in a volatile range. Shorting supports has been an expensive hobby lately. NASDAQ has so far bounced right on that huge 7k level. Let’s see the close today.
Everybody is extremely bearish on the FAANG space. Note the FANG+ index making a higher low compared to the local low we saw in late November. The index trades at big support levels here. Don’t be surprised to see the FAANG space suddenly put in violent spikes, just in order to frustrate investors again.
Watch Apple for clues on NASDAQ and the overall market here. After all it was a long time ago, we saw analysts with so little buy recommendations (green) on Apple.
Source: charts by Bloomberg